Netflix was founded in 1997 as a mail-order company that rented and sold DVDs over the internet. Today Netflix is the world’s leading internet television network with more than 36 million members in 40 countries enjoying more than one billion hours of TV shows and movies every month. On a normal weeknight, Netflix accounts for almost a third of all internet traffic entering North American homes. That’s more than YouTube, Hulu, Amazon.com, HBO Go, iTunes, and BitTorrent combined. What’s more, like other networks that started out broadcasting other peoples content (e.g., AMC, HBO), Netflix has recently begun creating new content in the form of original series such as House of Cards and Hemlock Grove. So how did a DVD mail order company become the world’s largest provider of on-demand internet streaming media? Let’s find out.
Netflix was established in 1997 with a new business model of renting DVDs through a mail-order service and in 1999 they launched their subscription service, offering unlimited rentals for one low monthly subscription. By 2007 Netflix had 7.5 million members in their subscription service. That was also the year they introduced streaming, which allows members to instantly watch television shows and movies on their personal computers. Streaming had already been out for a few years, thanks to Microsoft, RealNetworks, and Macromedia, and really caught on when YouTube was launched in 2005 as a video sharing website. And in 2007, Hulu, a joint venture of NBC Universal Television Group, Fox Broadcasting Company, and Disney-ABC Television Group started as a website offering on-demand streaming video of TV shows, movies, webisodes and other new media, trailers, and clips, and from NBC, Fox, ABC, TBS, and many other networks and studios.
By 2011, Netflix had 20 million members and realized that most of their customers were trending toward the streaming service. Seeing this change in customer preference lead the company to a rare misstep. To enable Netflix to focus its resources and energy on acquiring streaming content and to phase out the less profitable DVD-by-mail service, Netflix unveiled plans to raise prices and separate into two companies—a DVD mailer called Qwikster and a streaming entity still under the Netflix name. The split was never well-articulated and Netflix lost millions of customers (and market capital) in the process. But after realizing this move had backfired, they killed Qwikster and mounted one of the all-time great comebacks. Not only did they focus like a laser on streaming movies and television shows, but began to developing their own original content.
In a move that has industry insiders saying that Netflix wants to become the next HBO, the company has invested hundreds of millions of dollars in original series, such as the political drama House of Cards, which stars Kevin Spacey and Robin Wright, the murder mystery Hemlock Grove and Orange Is the New Black, a show set in a women’s prison that will air in July. They also acquired the rights to and produced the fourth season of the critically-acclaimed comedy Arrested Development, which will air later this month, and co-produce the second season of Lilyhammer starring Steven Van Zandt. If that wasn’t enough, they have also created a Ricky Gervais show called Derek and a children’s show called Turbo: F.A.S.T. that is co-produced with DreamWorks Animation.
Currently Netflix is taking a big gamble that a lot of people will want to stream entertainment to their mobile personal electronic devices rather than stay stuck in their living rooms and their cable boxes. If they’re right, the next few years could see a monumental shift in how we watch ‘television.’